If 100 percent of any change in income is spent, the multiplier will be
A) equal to the MPC.
B) 1.
C) zero.
D) inﬁnitely large.

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. If 100 percent of any change in income is spent, it means the MPC is 1. Substituting MPC = 1 into the formula gives a multiplier of 1/(1-1), which is infinitely large.

If 100 Percent of Any Change in Income Is Spent